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End of era for Highlandtown shoppers

Our view: Santoni's closing doesn't mean the bottle tax was a mistake

11:36 a.m. EDT, October 15, 2013

Like many Baltimoreans, we were saddened by the recent announcement that Santoni's Supermarket in Highlandtown plans to close its doors at the end of the month and lay off more than 80 employees. Santoni's has been a venerable neighborhood institution since the 1930s, and over that time it has built a loyal following among customers. These are difficult times for small businesses of all kinds, and particularly for independent grocers who operate on thin margins and face increasing competition not only from traditional chains like Giant, Safeway and Harris Teeter but also from discount warehouses and stores like Walmart and Target.

However, the store's chief financial officer, Rob Santoni Jr., is trying to make the story entirely about Baltimore's bottle tax, of which he was perhaps the most outspoken opponent. He claims the tax, which was enacted in 2010 and increased from 2 cents per bottle to 5 cents this summer, is the "sole reason" for his store's demise. He says his store has lost more than $4 million in total sales since the bottle tax took effect, and that beverage sales declined by 28 percent during that period.

We're in no position to contradict his numbers, but it is important to consider the effect of the bottle tax, both on Santoni's and the city, in a broader context.

The grocery business is a high-volume, low profit margin industry in which huge chain stores are able to market their products nationally and offset losses from discounts in one part of the country with profits from another. Local food stores can't do that because they operate on even slimmer profit margins — often just one or two cents on the dollar — and they can quickly lose money by even relatively small changes in prices.

Mr. Santoni is far from the only independent grocer who has had difficulty staying afloat in the post-recession economy. Other members of the Maryland Food Dealers Council, the trade association he heads, report similar declines in customers and revenues since the bottle tax was passed.

Yet there are clearly other factors at work. Mr. Santoni concedes that he probably wouldn't be in the situation he's in if the store hadn't borrowed heavily to remodel just before the 2008 recession clobbered the economy — surely a necessary step to keep up with the competition but one whose timing turned out to be awful.

Mr. Santoni may be right that he would have been able to weather the challenges to his business if not for the bottle tax, but it's also important to consider what the city is getting as a result of the levy. The original tax was a time-limited budget-balancing measure, but when the mayor and City Council made the tax permanent and increased its rate, they did so as part of a broader effort to raise money to remodel and renovate Baltimore's aging schools and to build new ones. The tax became the foundation, both fiscally and politically, for a $1 billion-plus city/state partnership that will transform the city's school system over a matter of years, not decades. The ambitious project will make Baltimore a much more attractive place for families to live, and that, in turn, will help all manner of local businesses in the long run.

The loss of Santoni's as a beloved neighborhood fixture is certainly distressing, but in the business world even the best-laid plans occasionally go awry due to unexpected changes of circumstances. That appears to be what happened to Santoni's. Other city independent grocers, meanwhile, have different financial structures and business models that apparently are allowing them to soldier on despite the tax.

That gives us reason to hope that the end of Santoni's Supermarket, however lamentable, represents an isolated case rather than a trend of store closing across the city. (Even Mr. Santoni says he expects his location will be picked up by another food retailer, and meanwhile, a new Harris Teeter supermarket is due to open in the Canton Crossing development, 1.4 miles from Santoni's.) It's easy for skeptics to say that no matter what Baltimore does it will never regain the population or wealth it once enjoyed, and that the bottle tax is merely hastening its demise. Yet the city has no choice but to try, and rebuilding its crumbling school infrastructure for a new generation of students is as good a place as any to start. It took courage for city officials to embark on this path when they passed the original bottle tax, and now they must stick to it until the goal is reached.